Affects Of Inflation

in LeoFinance2 years ago

Imagine, we live in the same country and are exposed to the same rate of inflation. I store my wealth in the form of money on a bank deposit, and this wealth decreases with inflation. You store your wealth in real estate (for instance, houses and apartments), and you rent them out or sell when you need money. With the inflation, the nominal value of your real estate and the rent prices grow on average (though, the price trends on the real estate marked may differ from the general price trend in the economy).

Who is the worse affected by the inflation, you or I? I am the worse affected. You are still affected, because you still have to have some money for payments in intervals between receiving rent payment and between selling houses and apartments.

If I do not have any wealth and live from hand to mouth, the impact of inflation on me is smaller, but non-zero. In this case, I am affected because adjustment of salaries to the inflation is usually lagging behind the growth of prices for goods due to the inflation.

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